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Political Limits to Globalization

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  • Daron Acemoglu
  • Pierre Yared

Abstract

Despite the major advances in information technology that have shaped the recent wave of globalization, openness to trade is still a political choice, and trade policy can change with shifts in domestic political equilibria. This paper suggests that a particular threat and a limiting factor to globalization and its future developments may be militarist sentiments that appear to be on the rise among many nations around the globe today. We proxy militarism by spending on the military and the size of the military, and document that over the past 20 years, countries experiencing greater increases in militarism according to these measures have had lower growth in trade. Focusing on bilateral trade flows, we also show that controlling flexibly for country trends, a pair of countries jointly experiencing greater increases in militarism has lower growth in bilateral trade.
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Suggested Citation

  • Daron Acemoglu & Pierre Yared, 2010. "Political Limits to Globalization," American Economic Review, American Economic Association, vol. 100(2), pages 83-88, May.
    • Handle: RePEc:aea:aecrev:v:100:y:2010:i:2:p:83-88
    Note: DOI: 10.1257/aer.100.2.83
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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